What principles of behavioral economics should we know in order to understand human behavior in relation to motivation and rewards? This interesting question was posed by Roy Saunderson, president of the American organization called Recognition Management Institute, in his recent article on incentivemag.com. He highlights the following ten principles of recognition and rewards.
1. Reciprocity
Employees perform better when they receive recognition. Employers who recognize their employees can expect better performance.
2. Conformity
Public employee recognition positively affects other employees who are not being praised at the moment, too.
3. Feedback
Recognition is a transfer of positive feedback to encourage certain behavior.
4. Confirmation
The purpose of recognition and rewards is the confirmation of specific contributions made by employees which distinguish them from others.
5. Justification
Employees prefer cash to tangible rewards. As for non-financial rewards, however, they tend to perform better in order get non-financial rewards they would otherwise not invest in. The reason is that they would have no justification for such investments.
6. Transferability
Only rewards are not enough because they are transferable - employees may change them with someone or give them to someone else. Recognition is, however, of a psychological nature and it is not transferable.
7. Social value
The ways you use to recognize and reward employees should involve the potential for employees to want to talk about them with other people.
8. Separability
Financial rewards should be strictly separated from salary increases. Employee should clearly see that they are being rewarded for something extra.
9. Expectations
While rewards are expected, recognition should be an unexpected surprise for employees.
10. Fairness
Your rewarding rules should go hand in hand with performance expectations. As soon as you cancel the rewards, you cann't expect anything else than a decrease in motivation.
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